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Can You Afford Deferred Payments?

December 05, 2018
by ClinicalPosters Staff

Is Deferred Pay­ment Counter­productive?

Apple Pay and Google Pay provide conve­nient digital trans­actions. Yet online 30-day billing requests are common. Estab­lish­ing a feasible bac­kend system is challeng­ing. E‑commerce stores are designed to promptly exchange pro­ducts for advance pay­ment. Digital products are instantly avail­able for down­load. Physical products must be picked, packed, shipped and some­times ordered from third parties or manufac­tured. With 15-, 30- or 60-day billing, the produc­tion work­flow continues unfunded.

Allowing customers to pay at a later date introduces a new set of account­ing costs. Many companies request­ing a line of credit often have their own vendor account requirements. This varies from completing a half-page form to filling out a 16-page document. Simul­taneously, require­ments for inter­nal billing systems must be met. Credit checks, billing dis­counts, interest fees for late payment, dunning, and collec­tion proce­dures need to be in place. Establishing a vender and accept­ing deferred billing is a bi­lateral approval process.

You could end up losing 10 percent or more of each sale.

Results from what­ever terms are approved for the appli­cant must be inte­grated into a seam­less online shopping experi­ence. At mini­mum, this may involve includ­ing a field for a pur­chase order (PO) number and bypassing online payment. A more ele­gant solu­tion validates multi­ple purchasers and credit limits. To save program­ming, companies may use a semi-manual work­flow, often accepting on-account purchases via email.

The credit card industry already has the 30-day billing infra­struc­ture in place. If you know when card pay­ments are due, you can make a card pur­chase one day after­wards for it to appear on the next billing cycle. Recreating the infra­struc­ture on a customer-by-customer basis is counter­productive from a business stand­point. Your company becomes a banker or pays another company to administer the accounts.

Online Invoicing Options

Video: Square Installments

An alternative to invoicing is an install­ment payment service. Square provides install­ment payment options for 3, 6 or 12 months for pur­chases between $250 and $10,000 meeting certain criteria. Companies like Stripe, PayPal, Square and Due offer invoicing and recur­ring payment solutions. Klarna is limited to consumers, not business-to-business. Getting some alter­native invoicing solu­tions to work auto­mati­cally with an existing secure online store­front may require a program­mer. A company called PayWhirl inte­grates recur­ring payments into Shopify and other plat­forms for a service fee on top of typical credit card trans­action fees.

You could end up losing 10 percent or more of each sale by the time you factor in fees, lost interest from deferred depo­sits and extra administra­tion. This may affect product or service prices and discounts offered.

Ideal Circumstances For Deferred Billing

Despite the time effort and expense in setting up deferred billing, it remains the preferred pay­ment method in some indus­tries. Hospitals, univer­sities and Fortune 500 companies typically defer most if not all vendor pay­ments. Credit cards are ineffi­cient for accounts payable depart­ments that process hundreds of thou­sands or millions of dollars monthly.

Hospitals, univer­sities and Fortune 500 companies typi­cally defer most if not all vendor payments.

Beyond the size of the company, prompt payment is most important. Large corpora­tions can easily overtax cash­flow of small busi­nesses. So credit is not neces­sarily based on what the payer can afford. It is issued based on limits the payee can reasonably extend without negatively impacting normal workflow.

Billing From ClinicalPosters

ClinicalPosters can generate a digital draft (pro-forma) invoice for you. It includes a payment button that activates the order. Just email a list of desired items along with your delivery and billing addresses.

Tips to Speed Corporate Checkout

Ready for checkout but no company card? If you are part of a large organization, establishing a line of credit can be daunting. Likely your first reaction is to ask to be billed. However, the time that elapses for your company to establish ClinicalPosters as a vendor and for ClinicalPosters to approve your company with a line of credit can span weeks. Here are some suggestions:

  1. Ask to use your employer’s credit card.
  2. Ask accounts payable to make payment.
  3. Use your personal credit card and submit invoice for reimbursement.
  4. Ask for pro forma invoice to submit to accounts payable for paper check or electronic draft (ACH).